New DOL Guidance Clarifies Eligibility for $600 Payments under CARES Act

On Saturday, April 4, 2020, the U.S. Department of Labor (DOL) issued Unemployment Insurance Guidance Letter 15-20 (UIPL 15-20) to provide further guidance to the states on the temporary expanded unemployment insurance benefits available under the Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020. UIPL 15-20 reiterates many provisions of the CARES Act, including what funding for the expansion of benefits covers, such as states’ administrative costs, along with how the states are supposed to seek reimbursement.  

The primary focus of the new guidance is on section 2104 of the CARES Act, which authorizes Federal Pandemic Unemployment Compensation (FPUC) benefits. Under the FPUC, individuals who are otherwise entitled to receive regular unemployment compensation (UC) will also receive a $600 flat payment through July 31, 2020.

In Appendix I to UIPL 15-20, the DOL made clear for the first time that only if an individual is eligible to actually receive at least a nominal amount of regular UC benefits for a given workweek will the individual also be eligible to receive the $600 payment:

Determining entitlement to FPUC.

i. States will calculate the weekly benefit amount, for the programs outlined above.

ii. If the individual is eligible to receive at least one dollar ($1) of underlying benefits for the claimed week, the claimant will receive the full $600 FPUC.

While presumably a person entitled to regular UC benefits would receive at least one dollar for a claimed week, that is not always true. For example, an individual who is partially unemployed may be eligible for unemployment. However, if the individual’s earnings for the week exceed the weekly benefit amount (WBA), then the individual receives $0 in regular UC benefits for that week even though the person is otherwise eligible for regular UC. In such case, the employee also does not receive the $600.

This will present challenges for employers seeking to have employees work reduced schedules, because the employees might end up with the worst of both worlds: reduced wages and an inability to supplement those wages with additional unemployment benefits. In many cases, it may be better to not work at all to ensure receipt of not only regular UC benefits but also the $600 additional payment.  At a minimum, employers that want to ensure that reduced-hour employees are able to access expanded unemployment benefits may wish to schedule these workers to not earn more than the state’s WBA for any given week (thus allowing them to collect at least one dollar of unemployment, plus $600).

An alternative solution to this problem might be work share (called short-term compensation in the CARES Act), because the employee would receive partial wages and partial regular UC benefits, and thus the $600. This does create an incentive for states that do not currently have work share to create such programs, and for employers to participate in work share.

UIPL 15-20 does not make clear whether this same determination applies to Section 2102 of the CARES Act, which creates a separate unemployment expansion, the Pandemic Unemployment Assistance (PUA) benefits.  Under this program, individuals who otherwise would not qualify for regular UC benefits might qualify for PUA benefits if they meet one of 10 enumerated COVID-19-related reasons. How that will be interpreted becomes even more important, because there is a potential mismatch between sections 2102 and 2104 with respect to the $600.

For example, an individual with no work history would not have sufficient wages to qualify for regular UC benefits. However, under the PUA, an individual will receive at least the minimum regular UC benefit.  Under UIPL 15-20, because the individual received a minimum payment, they also will receive the $600 enhanced payment.  Following the guidance of UIPL 15-20 (and the seemingly plain language of Section 2102), all individuals who would not qualify for regular UC benefits but would qualify for PUA under a COVID-19 reason will receive the state minimum UC benefit plus $600, whereas individuals who may be eligible for regular UC benefits but end up with no WBA because they earned too much in a week to qualify for regular UC will not receive $600.

Employers looking at their options to ensure that their employees can receive the maximum amount of income replacement while also balancing their operating needs and cash flow may have to consider whether having employees perform partial work outside of a work share arrangement will in fact hurt employees economically when compared with not working at all.  This may present challenges, because an individual may be eligible for both regular UC benefits and also have a COVID-19 reason for PUA benefits, calling into question how the states will distinguish between the two eligibility standards. 

Finally, UIPL 15-20 reiterates that integrity of the regular UC programs, including that individuals be unemployed through no fault of their own and be able and available to work, remains a critical issue. But to date the DOL has not explained how an individual who might be disqualified for regular UC benefits, for example by quitting, would not be eligible for PUA benefits if the reason for quitting is “directly related” to COVID-19. Thus, while once again emphasizing to the states that they need to protect against fraudulent claims, this may be difficult to do in practice, at least for claims filed over the next several weeks before shelter-in-place orders are lifted and the economy starts to rebound. 

Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.